House prices slip, sales fall in Kelowna

Home prices and sales in Kelowna took another tumble last month as higher mortgage interest rates and escalating inflation scare off potential home buyers.

"This is what typically happens when interest rates move upward," said Lyndi Cruickshank, president of the 2,500-member Association of Interior Realtors.

"It makes buying a home more costly, making what a purchaser can afford more limited."

The most watched monthly statistic from the association is the benchmark selling price of a typical single-family house.

In June, that was $1,112,400, down $18,000 from the benchmark of $1,130,400 in May and the record-high of $1,131,800 in April.

While home prices are cooling, they are still historically high and 15% more than they were at this time a year ago.

In fact, Kelowna is still considered unaffordable and the small price drops so far are not enough to bring medium-and-low income earners out of the woodwork to buy a home.

The real estate slowdown is even more dramatic when you look at the number of sales.

In June, 339 homes of all kinds (single-family, townhouse and condominium) sold, a 32% plummet from the 498 homes sold in May.

This market means two things -- potential sellers will have to price their homes reasonably to attract a buyer and buyers can take their time and bargain more.

Gone are the days of earlier this year when the market peak meant sellers were getting multiple offers and selling for more than list price.

In fact, price reductions are the order of the day in the current housing market.

The benchmark selling price of a typical townhouse in the city in June was $763,800, down considerably from the $829,800 it was in May.

For condos, the June benchmark was $537,200, a slide from $551,800 in May.

Part of Kelowna's run up to record-high prices was a shortage of inventory -- not enough homes listed for sale for the hefty number of potential buyers vying to buy a home.

That scenario has also changed with the number of listings increasing to 1,744 in June, a 28% increase from the 1,358 listings in May.

More supply and less demand sets the scene for further price drops and sales reductions.

While mortgage interest rates are on the rise and have certainly had an impact cooling the market, they are still historically low.

At its lowest in late 2020-early 2021, a discounted five-year fixed rate could be had for 1.4%.

Today it's more like 4.2%

That's still much lower than the 21% when inflation was previously bad in the early 1980s.

Yet, mortgage interest rates have more than doubled recently and are likely to continue rising, so potential home buyers are leery.

"So, the question now becomes: How big an effect will rising interest rates have?" asked realtor Johan Gouws of Royal LePage Kelowna.

"The view on this has been that a slowdown in house prices is likely, but a crash is trickier to call. That's because you broadly need two things for a crash. You need a world where buyers can't pay as much, which is what rising interest rates do. But you also need a world where sellers are forced to sell them. So what happens generally is that in the absence of mass unemployment (which means forced home sales and repossessions) you get transactions drying up, rather than prices collapsing."

And that's exactly what seems to be happening in Kelowna.

The time it takes a home to sell is also on the rise.

Previously it took about 25 days, now it's crept up to more than 30.